FHCP’s Michael Graydon on tariffs and the path ahead for Canada’s food sector
The food sector is closely following the developments surrounding U.S. President Donald Trump’s proposed 25% tariff on Canadian imports. Although the tariffs were set to take effect on Feb. 4, Trump has since announced a 30-day pause to allow the two countries to negotiate a resolution. In a Q&A with Canadian Grocer, Michael Graydon, CEO of FHCP, shares his insights on the ongoing situation and what’s at stake for Canada’s food industry.
With the news of the 30-day delay, how would you characterize the current environment for the food sector? Was that a welcome pause or does it just add to the uncertainty?
I think it just adds to the uncertainty. It has maybe given people a bit more time to plan, organize and possibly shift some supply chains to help alleviate the damage. But there’s just a real sense of pause within the industry right now. Many decisions on capital investment are on hold until there’s a better understanding of where things sit. So, there’s just that uneasiness. People are also trying to understand, is this something we’re going to have to deal with for the next few months…or the next four years? And what might the outcome be? If we have to deal with this uncertainty for four years, it will likely have a fairly dramatic impact on the industry.
What are you most concerned about in terms of the immediate and long-term impacts of tariffs, particularly on the food and beverage manufacturing industry?
I think we’ll see a softening of capital investment in manufacturing, which is unfortunate because we are the largest employer, from a manufacturing perspective, in the country. For medium or smaller manufacturers that highly depend on exports to the United States to grow their businesses, there will be a significant impact as they work to try to redistribute that volume into the Canadian market or invest in manufacturing capacity in the United States. That is an unfortunate component because that means investment is not happening in this country; it’s happening in the United States.
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For large manufacturers, many of them are still in good shape. For many of our members, the majority of their product is made here in Canada by Canadians for Canadians. [Others] with North American supply strategies may have to adjust their manufacturing capacity… especially if retaliatory tariffs start having an impact on particular categories. Until we get a better understanding of what the retaliatory tariffs in phase two and three will be, we’re in a wait-and-see position. The potential is there for job losses, the potential is there for business failures and the potential is there for pivoting and readdressing the Canadian market for growth.
Another concern is less variety on shelf… Certain [U.S.] companies may find it better to just not ship to Canada and not deal with Canada. I don’t think any particular category would collapse. There are Canadian manufacturers that can fill the voids, but in some cases, it may be well-known global brands that disappear from the Canadian shelf.
What strategies and measures do you believe are needed to mitigate the risks and strengthen Canada’s food sector domestically?
In the medium to long term, the government needs to take food manufacturing more seriously. It is the largest manufacturing sector—larger than automotive and aerospace combined. And yet, the amount of investment in time and funding by government towards agri-food manufacturing is quite low in comparison. So, the government needs to develop a manufacturing strategy related to food.
Food security [is essential]—having that resilience and self-dependency to produce the food required for the people who live here. This event with the tariffs and challenges with the U.S. identifies that we are not resilient or not self-sufficient and are overly dependent on a North American strategy versus a Canadian one. While I think the North American strategy is a better strategy for business all around… we’ve got to make sure we’re in a better position to weather challenges by making strong investments in manufacturing here and leveraging the massive value that we have in agriculture today. Too many products that are grown in this country go to the United States for processing and come back as ingredients. So, I think there is a massive opportunity for us in that area.
There is also a strong need to get rid of provincial trade barriers. It’s not as significant as it relates to packaged and finished goods as it is the ingredients that we use in our manufacturing. For many agricultural products, there are challenges on occasion getting products from an inter-provincial perspective.
We also need to leverage other trading partners—for example Europe and Asia Pacific—and find opportunities to be less reliant on the United States. The challenge we have with the United States is to disconnect and it’s not going to be easy because it is deep, it is complicated, it is very connected, it’s easy… and it is a very valuable relationship.
What is your perspective on the ‘buy Canadian’ sentiment that’s gaining momentum, especially since buying all-Canadian goods is complicated given our interconnected supply chains? And how can the food sector respond?
It needs to come down to what we’ve phrased as ‘let the makers make.’ If it’s made in Canada by Canadian workers, for Canadians to enjoy and to use, then that should be the reference. It is hard in many sectors of the food business and consumer health products because a lot of the ingredients aren’t made in Canada. We have to source globally for many ingredients, but they come in their raw form and are assembled in Canada by Canadian workers in Canadian plants. So, I think it’s less important who owns the business. It’s more who makes it. And [consumers] have got to understand we do not have the capacity in Canada to have every ingredient that’s necessary.
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When the 30-day pause on tariffs is over in March, what is your best guess on what happens next?
I’m really hopeful that we will have further delays. Two things are starting to percolate in the United States. One is the stock markets don’t seem to like tariffs on Canada and Mexico, and the president uses the stock market as a bit of a bellwether in regards to how he’s doing. If the markets are down because of tariffs, he will see that as a negative. Secondly, polling in the United States shows that many Americans don’t believe that it’s right to put tariffs on Canadian and Mexican goods. There is even a feeling within America that we are part of a collective.
I do believe that the president has an end game and I think he would like the Free Trade agreement ripped up and renegotiated, and I don’t think he wants to wait until 2026… One thing we have to understand is the Free Trade agreement, as it exists today, will change and likely not entirely in our favour. But I do believe there are some wins that we can potentially get as well.
This interview has been edited for length.
